Explosion of income and tax cut

State coffers are overflowing thanks to inflation, which has increased Quebec’s revenues. As the election campaign approaches, the CAQ is taking the opportunity to promise a tax cut that will affect individuals in a future mandate.

• Read also: A recession is not the most likely scenario, says Girard

This is a “remarkable year,” said Finance Minister Eric Girard, who tabled the pre-election report Monday morning in the National Assembly.

Since the tabling of the most recent budget last March, revenues have increased in all the budget columns of his department.

Inflation and the post-pandemic economic recovery explain this growth.

The Quebec government’s budget forecasts are plausible, even concludes the Auditor General, Guylaine Leclerc, after analyzing the report.

The aim was to ensure that political parties “don’t have any surprises when they come to power”, she says.

Pay inflation

It is the income forecasts from personal income tax that are increasing significantly and rapidly. Recently, high inflation and favorable economic conditions led to a 9.4% increase in wages and salaries.

The expected additional growth affecting personal income tax is $2.3 billion, for a total of $43.5 billion related to the 2022-2023 fiscal year.

This progression should continue in 2022-2023, then slow down the following year in order to achieve more moderate growth.

The citizens’ tax represents 30% of all the autonomous revenues of the State.

The consumption tax also allows the State to enrich itself.


Tax reduction

Thus, after the Liberals and the Conservatives, the CAQ government promises that it will reduce the tax burden on individuals. “Quebecers are the most taxed citizens in North America,” described Minister Girard.

Despite this promise, he does not rule out distributing a check again to counter inflation.

However, he refuses to reveal the details that will be linked to this tax cut. “We are going to do this in an orderly and responsible way,” he pleads.

In the last budget, Quebec forecast a deficit of $6.1 billion and a return to balanced budgets in 2027-2028. The report now indicates a deficit of only $729 million, following the payment to the Generations Fund. The department has also provided for provisions in the order of $2 billion per year for the entire financial framework. Then, there is no longer any trace of the structural deficit.

Minister Girard nevertheless maintains his 5-year horizon for the return to balanced budgets.

To finance the tax cut, Quebec could therefore have recourse to the credit card. “We must not cut services. We must not return to budgetary austerity”, indicated Mr. Girard.

Same for the Liberal Party. “It’s not something that would stop us,” said Carlos Leitão, official opposition spokesman for public finances.

According to Mr. Leitão, the government has a lot of money, but vulnerable populations are suffering from the rising cost of living.

-Listen to Marc-André Leclerc’s interview with Eric Girard, Minister of Finance at the microphone of QUB radio:

Caution

Moreover, the uncertainty hanging over the global economy could upset the only scenario envisaged by the Department of Finance, notes the auditor general.

Among other things, she criticizes the absence of a plan B in the government’s boxes. It points in particular to the inflationary outbreak which is causing monetary tightening and the war in Ukraine. A scenario based on a recession would have been useful, pleads Mme Leclerc.

For his part, Mr. Girard and his team estimate the risk of recession at 35%. It recalls the existence of a margin of prudence.

Billions in taxes

4.9 million Quebecers paid income tax in 2020

30% of all state revenue comes from individuals

In 2022-2023, Québec expects to recover $43.4 billion in this way.

Total revenues envisaged: $144.5 billion

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